Income gap now the largest in history

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And they complain about taxes and big government?  Checkout my Cadence of Finance presentation, accessible via my homepage of efficientminds.com, for causes of the widening wealth gap   See Robert Reich’s Aftershock for suggested remedies.

http://www.usatoday.com/story/money/business/2013/09/10/pay-gap-richest-poorest/2793343/

Also see this article from the managing editor of Fortune magazine.

Another place for finance graduates to look for jobs

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I recently received the following flurry of finance job postings. For those recent finance graduates that follow my website or are LinkedIn, I recommend you set up a profile on the cybercoders.com website. Let me know if you have already found a job or if you land any interviews as a result of today’s suggestion.

Good luck!

Hi David J.,
As a member of the CyberCoders community, we want to do everything we can to help you find the right job! Below are your job results for your search: Analyst – Venture Capital Fund San Jose, CA
Want even better job matches?  Customize your search now.
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Verizon paying $130 billion (with a B) for Vodafone’s interest in Verizon

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In one of the FIN101 sections this week we discussed targets and acquirers.  I said the acquirer’s stock price tends to drop and the target’s stock price tends to rise.  This recent article in the New York Times makes a similar comment:

“Verizon shares are about the same as they were before rumors of the deal surfaced last week, even though the share price of the acquiring company usually drops.” [emphasis added]

Let’s look at the math of the acquisition.  If Vodafone’s 45% stake is worth $130B then Verizon’s total value is $130B/0.45 = 289B.  That is $159B for Verizon’s 55% and $130B for Vodafone’s 45%.  The NYT article suggests the Enterprise Value is $176B, but that number does not include Minority Interest (which is 52.376B as of the 2013.12.31 balance sheet).  So let me calculate what Vodafone is worth:

Enterprise value = Market cap + debt + minority interest + preferred stock – cash and cash equivalents

= 132.61B + 47.618B + 52.376 + 0 – 3.093B = 229.503B

Therefore Vodafone’s 45% is: 0.45*229.503B = 103.28B

So why is Verizon overpaying by roughly 30 billion dollars?  Who knows?  Perhaps some of the board members, executives, or large shareholders of Verizon are also shareholders of Vodafone.  Good for those folks, but not for the remaining shareholders.

If you factor in VZ’s current P/E (84.87) and P/B (3.92) that enterprise value of 229.503 seems inflated.  So apparently the offer for Vodafone’s interest includes a mix of the overpriced stock and cash.  Maybe it is a fair deal…

Trump University Made False Claims, Lawsuit Says – NYTimes.com

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While one should reserve judgement, one should consider that Trump businesses have filed for bankruptcy 4+ times.  Does that sound like an organization you should transfer $35,000 of your wealth to learn how to make money in real estate?

http://mobile.nytimes.com/2013/08/25/nyregion/trump-university-made-false-claims-lawsuit-says.html

Wall Street Ends Higher on Economic Data, Despite Halt – NYTimes.com

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Should “glitches” like these concern investors?  Should you be concerned if your retirement funds are in a market that has flash crashes, trading halts, and computers executing trades and trading strategies by the millisecond?

All good questions.  I don’t have a definitive answer.  Let me quote Robert Reich’s “Aftershock”: “Wall Street is a casino in which high stakes wagers are placed within a limited number of betting houses that keep a percentage of the wins for themselves and fob off losses on others, including taxpayers.”

If you have money in the market I suggest you buy low and sell high.  For example,  Netflix has  price to earnings ratio of 335 now.  The historical average for the market in general is roughly 15.  This seems like a sell high opportunity.  Yes, it could go higher.  But isn’t a P/E of 335 high enough?

http://mobile.nytimes.com/2013/08/23/business/daily-stock-market-activity.html

LA Times – Facebook is a bummer, study says

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I don’t have a Facebook account.   Call me old school, but according to this article I am happier!  May you all be happy as well, Facebook or no Facebook.

http://touch.latimes.com/#section/-1/article/p2p-77032533/

By the way, anyone entering into a short position on Facebook stock?

An old news article worth sharing: “Dividend tax hike ‘could have been worse'”

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While organizing some of my files today I stumbled across a CNN Money article on the dividend tax hike “compromise” reached earlier this year: 20130102_dividend_tax_hike

Most of you probably already know where I am going with this.  🙂  It is yet another reminder of how the wealthy (in this case those earning more than $400,000 AGI) avoided a restoration of taxes to pre-great recession / pre-Bush rates.  However, as I mentioned in my Cadence of Finance presentation, taxes are not the main driver behind the widening wealth gap.  See the presentation for more details.